Jake’s Guide to Depreciation for Crawler Carriers & Drill Rigs Purchased in 2013

December 13, 2013 by Rig Source Inc.

Equipment Depreciation has its advantages in the drilling industry so why not educate yourself on how to earn the maximum benefits before purchasing crawler carriers or drill rigs.  Most of these advantages come in the form of tax credits and bonuses that are offered through the federal government. Eligibility for the various depreciation credits and bonuses can vary based on factors such as whether or not a unit is new or used. Therefore, it’s best to learn what your options are now so you’ll know exactly what you’re looking for when it comes time to actually make a crawler carrier or drill rig purchase.tax breaks photo

Since I am far from a tax expert, I reached out to CPA, Jake Rockafellow for the facts. The information provided should give you a head start to understanding depreciation benefits, and how to select the right crawler carriers or drill rigs to maximize those benefits. Remember though, these are only guidelines and it is very important to speak to your company tax advisors to understand how these details specifically impact your organization.

The Facts:

Equipment purchased in 2013 may be subject to Section 179 depreciation and 50% bonus depreciation. Section 179 and bonus depreciation can significantly reduce a company’s tax liability which is attractive to business owners who may have had a better year from what they originally forecasted and planned for.

In a nutshell, here are the aspects of each that business owners should know.

Section 179:

  1. Can be taken on new and used equipment.
  2. Maximum deduction allowed in 2013 is $500,000, and is phased out dollar for dollar if equipment purchases exceed $2,000,000.
  3. Section 179 expense cannot put your company at a loss for the year. For example, if a company is showing $100,000 in net income for the year before the section 179 deduction, $100,000 is the maximum deduction allowed regardless of how much equipment the company purchased in 2013.
  4. The equipment must be used for business purposes more than 50% of the time to qualify for the deduction.

Bonus Depreciation:

  1. Can be taken on new equipment only.
  2. There is no phase out which is more attractive to larger companies whose capital expenditures exceed $2,000,000.
  3. Unlike section 179, bonus depreciation can be taken by businesses that will have net operating losses in 2013.
  4. Deduction is for 50% of the purchase price of the equipment. For example, if a company purchases a $100,000 piece of new equipment, it will receive a $50,000 bonus depreciation deduction. 

As you can see, there are a number of depreciation benefits for business owners looking to purchase either new or used crawler carriers or drill rigs. If purchasing one of these units has been on your list, why not buy before the year ends and you are no longer eligible to receive these benefits?  By taking advantage of the opportunities that exist from depreciation now, it could be exactly what your company needs to move ahead strong in 2014.

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